If you follow the smartphone patent wars, you've probably heard of the International Trade Commission (ITC), which seems to get dragged into every high-profile patent dispute over the devices. Just this month, Motorola asked the ITC to ban various Apple products from the US, and the ITC separately ruled that Apple doesn't infringe some Samsung patents. But how did this obscure Washington bureaucracy become a major front in the patent wars?

The ITC has the authority to police "unfair methods of competition" by importers, a phrase interpreted to include patent infringement. Because virtually all mobile devices are manufactured overseas, getting the ITC to ban the importation of a device can be just as effective as getting an injunction from a regular court.

A new study from the Cato Institute, a libertarian think tank, suggests that the ITC's patent-enforcement process is tilted in favor of patent holders—and especially patent trolls. The author, K. William Watson, argues that the inherently discriminatory nature of ITC patent enforcement—ITC cases can only be brought against imported products, not domestically produced ones—violates America's obligations under World Trade Organization rules not to discriminate against foreign products. He says Congress should eliminate the provision of trade law, known as Section 337, that gives the ITC authority over patent issues.

Two bites at the apple

Section 337 has been on the books since 1930, but it didn't see regular use until Congress created the ITC in 1974. In its early years, the ITC handled a mix of patent- and non-patent cases, but in the last decade, the number of patent-related cases brought under Section 337 has exploded.

The popularity of the ITC among patent holders was bolstered by the 2006 Supreme Court decision in eBay v. MercExchange. When a patent holder wins an infringement lawsuit, it is sometimes awarded an injunction against continued use of the patent by the infringer, in addition to monetary damages. The threat of such an injunction gives the patent holder extra leverage that it can use to extract larger settlements. For example, shortly before the eBay decision, the patent troll NTP used the threat of an injunction to force smartphone maker Research in Motion to fork over $612.5 million. But the eBay decision made it harder for patent holders to obtain these injunctions, tilting the playing field a bit more toward defendants.

So patent holders looked for other remedies. The ITC has an injunction-like remedy called an "exclusion order," which instructs customs officials not to allow particular products to be imported into the United States. These turn out to be relatively easy for patent holders to obtain, and the exclusion orders were not affected by the Supreme Court's ruling on injunctions. Hence, after eBay the ITC became the easiest way for a patent holder to get a competitor's products pulled from the shelves.

Exclusion orders have proven particularly popular with patent trolls. The eBay standard asks whether the patent holder has suffered an "irreparable injury" due to infringement, and whether an injunction is necessary to repair that injury. Ordinary technology companies can often satisfy this standard. But it's much harder for "non-practicing entities"—patent trolls—to do so, since they can't argue their own products have been hurt by unfair competition. The standard for obtaining exclusion orders is easier for patent trolls to satisfy, however; unsurprisingly, they have accounted for a growing share of the ITC's Section 337 cases.

The ITC favors patent holders in another way as well. Congress has mandated that the ITC resolve Section 337 cases quickly; on average, ITC investigations are resolved in about half the time of patent cases in district court. In principle, faster decisions are a good thing—but in practice, the ITC's strict deadlines can give patent holders an unfair advantage. The patent owner gets to decide when to file a complaint, so it can spend as much time as it wants doing legal research prior to filing. But the alleged infringer can't start preparing its defense until the case is filed. And once the case starts, the defending party has only a limited amount of time to prepare a response.

Finally, the mere existence of the ITC gives an important advantage to patent holders. That's because patent holders get to choose whether to file their cases before an ordinary district court or before the ITC. Indeed, they're allowed to bring cases in both venues simultaneously. Patent holders therefore get two opportunities to argue for excluding the defendant's product from the market. If the two tribunals reach opposite conclusions, the discrepancy might eventually be resolved by the appeals courts, but in the meantime the defendant could be subject to crippling market exclusion.

Not only is this scheme unfair to firms accused of infringing patents, but Watson argues that it is also illegal. The World Trade Organization's rules prohibit member states from passing laws that unfairly discriminate against imported products. And Watson writes that "a dispute settlement panel determined in 1989 that Section 337 violated this national treatment obligation." While Congress has tried to remedy some of the specific issues raised by that ruling, Watson contends that the existence of the ITC is inconsistent with America's treaty obligations.

Watson proposes a simple reform: repeal Section 337 and get the ITC out of the business of adjudicating patent disputes. He argues that the ordinary court system is perfectly capable of handling patent disputes, and that eliminating the ITC's patent-enforcement role would simultaneously improve the fairness of the patent system and reduce a source of unnecessary friction with America's trading partners.

(Disclosure: I'm an adjunct scholar at the Cato Institute, an unpaid position. I didn't participate in the preparation of this study.)

I find this article barely readable. It's confused, unclear (maybe only to non-lawyers ?), has diagrams with no legend.

I know writing articles, especially arcane ones no one can understand is a big ego trip, but what's the point ?

The charts come from the study. I was a little concerned about the lack of legends myself but I thought the meanings of the lines were pretty clear in context. In the upper chart, the black line is all cases and the grey line is non-patent cases. In the lower chart, the line is fraction of cases filed by NPEs (aka patent trolls).

As for the arcaneness of the article in general, I did my best to make the article readable and I'm sorry to hear I failed in your case. It's an inherently arcane subject so writing about it is a challenge. But I personally think it's an important topic that I hope is of interest to at least some Ars readers.

While the first graph could use a legend, I think it's clear on reflection that, in a graph of total vs a subset (e.g. total cases filed vs non-patent cases), the higher value must be the total and the lower value must be the subset.

I assume the defense of the ITC's function is that patent cases take a ridiculous amount of time, an amount of time that makes them almost irrelevant in who gains market share. But I would rather see a fix that directly addresses that problem than the creation of a parallel court system.

The patent owner gets to decide when to file a complaint, so it can spend as much time as it wants doing legal research prior to filing. But the alleged infringer can't start preparing its defense until the case is filed. And once the case starts, the defending party has only a limited amount of time to prepare a response

This would be true of any legal suit, whether or not it's brought in the ITC or another venue.

The patent owner gets to decide when to file a complaint, so it can spend as much time as it wants doing legal research prior to filing. But the alleged infringer can't start preparing its defense until the case is filed. And once the case starts, the defending party has only a limited amount of time to prepare a response

This would be true of any legal suit, whether or not it's brought in the ITC or another venue.

That's where the "strict deadlines" come in. In an ordinary court case, the defendant can usually ask for more time to prepare its defense. But the ITC usually denies such requests.

This analysis seems off in outer space from the reality of patents in the computer industry. Much of the history has been driven by the major industry participants. Both IBM and Microsoft have managed to obtain a significant return on their patent portfolios without law suits through private negotiations. No record of their activity is available for anyone to study. Of course anyone who has nothing better to do can read through some of their patents. They generally don't involve startling innovations. But, given the large investment both companies made in developing computer software, it is not surprising that many of their patents will survive a test or prior art.Apple has upset the more or less settled practices at least among the industries larger players. The big problem in dealing with Apple's issues is a legal failure in distinguishing different kinds of intellectual property. The word patent should have no place in the major law suit Apple has won because their intellectual property has nothing to do with patents.It would not be surprising if national loyalties seeped into computer industry intellectual property disputes. Probably, most of the world is none too happy with the history of American dominance of the computer industry. But there probably also is some justice in American software companies concerns that some Asian countries don't pay much attention to intellectual property laws. In any case the Apple suits against knockoff designs that copied their stylized UI elements have nothing to do with general patent issues and more to do with a history of less developed countries producing low priced knockoffs of premium branded products.

It's obviously wrong that patent trolls can take two bites at the same apple - with the ITC not bound by all the conventions of a court case (e.g. the new higher standards for injunctions).

In an ideal world this would be a 20 minute conversation followed by swift action to block this abuse of process by a small number of companies. And that's ignoring the (new to me) fact that it's already illegal under international convention.

This analysis seems off in outer space from the reality of patents in the computer industry. Much of the history has been driven by the major industry participants. Both IBM and Microsoft have managed to obtain a significant return on their patent portfolios without law suits through private negotiations. No record of their activity is available for anyone to study. Of course anyone who has nothing better to do can read through some of their patents. They generally don't involve startling innovations. But, given the large investment both companies made in developing computer software, it is not surprising that many of their patents will survive a test or prior art.

Given the position you have taken, one could easily come to the conclusion that you are reinforcing the postion of the above article as IBM and MS are rarely seen litigating through the ITC, and as such would not be hurt by the nutering of such.

dnjake wrote:

Apple has upset the more or less settled practices at least among the industries larger players. The big problem in dealing with Apple's issues is a legal failure in distinguishing different kinds of intellectual property. The word patent should have no place in the major law suit Apple has won because their intellectual property has nothing to do with patents.

Except for the issue that companies (eg: Apple) have Patented their Intelectual Property, and then use such IP under Patent protection to litigate against other companies.

dnjake wrote:

It would not be surprising if national loyalties seeped into computer industry intellectual property disputes. Probably, most of the world is none too happy with the history of American dominance of the computer industry. But there probably also is some justice in American software companies concerns that some Asian countries don't pay much attention to intellectual property laws. In any case the Apple suits against knockoff designs that copied their stylized UI elements have nothing to do with general patent issues and more to do with a history of less developed countries producing low priced knockoffs of premium branded products.

In general the rest of the world isn't typically concerned with the history of dominance by America of the computer industry, rather the perception that in many things the USA follows the "do as I say, not as I do" mantra (this extends to many things beyond patents btw).

The other problem regarding copying, cloning, low priced knockoffs, isn't and shouldn't be limited in view to the work from less developed countries. As was raised as part of iOS6 (simply as an example as you use Apple, but should not be limited to such), the knockoff design of the protected ?Swiss? clock design by Apple. The expectation is that some will argue that it is a simple design and that there are only so many ways to iconify a clock, which adds weight to the position that there are only so many over arching ways to design things in life (like a toaster) and most other options simply do not make practical sense.

The article seemed pretty clear to me, and even well-reasoned. All that was missing was the legend under the graph; though you can infer which bar is which.

It does sound like the ITC should be removed from the patent lawsuit process, especially since it can only be used against imported products, and the NPEs have taken greatly increased advantage of the loophole in the law.

Anything that makes it harder for NPEs without a corresponding increase in difficulty for companies with real products sounds like a win. And cutting down on the patent madness also sounds like a good thing.

The ITC has the authority to police "unfair methods of competition" by importers, a phrase interpreted to include patent infringement.

The ITC has in practice become an unfair method to prevent competition (at least in the IT and consumer electronics industries

And correct me if I'm mistaken, but don't the courts, when they find in favour of an IP plaintiff, usually decide that the punishment is a question of how much royalties (and perhaps damages) are owed, rather than outright barring the competitor from the market itself?

I think this is the real reason for the ITC's popularity; trade injunctions are a "thermonuclear" option, that can be not just expensive, but deeply harmful -- even ruinous -- to one's opponent.

Frankly, if they are trying to hobble the ITC, it must be doing something right...

Why is Ars associating itself with this propaganda outlet? Is there a follow up article from the North Korean press agency on effectiveness of Stalinism in boosting economic growth?

edited to vent more spleen, plenty more spleen left and bile, lots more bile...

I'm not exactly a fan of the Cato Institute, myself, and I sympathise with where you're coming from. But Timothy Lee's articles have consistently been worth reading (connections to that propaganda outlet not withstanding) so perhaps you have a substantive objection?

The CATO institute is notorious for fighting against all government regulations and for privatizing everything.

That immediately makes this story suspect. In the interests of journalism it should include some thoughts from people who beg to differ. On the other hand, I think things like the ITC and the World Trade Organization are just awful, so maybe this is a case of a broken timepiece being right.

Frankly, if they are trying to hobble the ITC, it must be doing something right...

Why is Ars associating itself with this propaganda outlet? Is there a follow up article from the North Korean press agency on effectiveness of Stalinism in boosting economic growth?

edited to vent more spleen, plenty more spleen left and bile, lots more bile...

I'm not exactly a fan of the Cato Institute, myself, and I sympathise with where you're coming from. But Timothy Lee's articles have consistently been worth reading (connections to that propaganda outlet not withstanding) so perhaps you have a substantive objection?

Well... let's start with the title "ITC: How an obscure bureaucracy makes the world safe for patent trolls;" How about we change that to "ITC: How lack of regulation lets corporations abuse due process."

Original subtext - Shadowy government bureaucracy in league with Patent Trolls opresses corporate America.

Just to question something - why is it called the "International" Trade Commission? What country has the hubris to create an organisation to protect its own companies and then calls it "International"? At least fix the name, and call it the "US Protection of Local Companies Commission".

To the other commenters here on Arstechnica: It doesn't matter what you think of the Cato Institute. They have presented the fact that the ITC's role in the matter is illegal under our WTO treaty obligations. They have presented the fact that companies have used the ITC as a vector for anti-competitive practices, to shut down competition, to extract ill-gotten gains by way of direct force of the United States government. This is wrong, and what do we do? We fight about which side Cato is on.

I think some of the people here would cut off their nose to spite their face. These guys at Cato, the people you hate so much, they are on our side in this instance, and here we are fighting over it. If it was the EFF we'd all agree on it whole heatedly and commence endless circle jerking.

This is what has become of us... We have our enemies: even if they are for something we're for, we have to be against it now because they are our enemies. And we have our friends: even if they do something we don't like, we have to ignore it because they are our supposedly on our side or "for the little guy". And good Lord, don't even ask to cooperate across the isle.

When presented with a problem, it all goes to hell because we're too busy with our politics. And we wonder why Congress and the House can't get anything done! We blame them for bringing us where we are. Not only did we vote for these people, we're exactly like they are! This nation is screwed.

I don't care what any of you say, the minute a standard desktop computer can get banned from the county in which it was designed... for alleged (not proven mind you!) patent infringement... we've lost it. We've lost the ability to carry on as a normal civilization. We should give up technology and go back to the caves... because we can't carry on like this. We have serious problems with obvious plain as day solutions, but here we are fighting over the political teams like it some kind of ball game.

So I say, screw it. Let it all go to hell. We don't deserve any of this stuff. Let the nation collapse. We will only appreciate what we have by losing it.

This analysis seems off in outer space from the reality of patents in the computer industry. Much of the history has been driven by the major industry participants. Both IBM and Microsoft have managed to obtain a significant return on their patent portfolios without law suits through private negotiations. No record of their activity is available for anyone to study. Of course anyone who has nothing better to do can read through some of their patents. They generally don't involve startling innovations. But, given the large investment both companies made in developing computer software, it is not surprising that many of their patents will survive a test or prior art.Apple has upset the more or less settled practices at least among the industries larger players. The big problem in dealing with Apple's issues is a legal failure in distinguishing different kinds of intellectual property. The word patent should have no place in the major law suit Apple has won because their intellectual property has nothing to do with patents.It would not be surprising if national loyalties seeped into computer industry intellectual property disputes. Probably, most of the world is none too happy with the history of American dominance of the computer industry. But there probably also is some justice in American software companies concerns that some Asian countries don't pay much attention to intellectual property laws. In any case the Apple suits against knockoff designs that copied their stylized UI elements have nothing to do with general patent issues and more to do with a history of less developed countries producing low priced knockoffs of premium branded products.

You should note that the opening shots in the smart phone patent wars were fired by Nokia and then Motorola against Apple, while Apple Sued HTC (a Google Android proxy), which counter-sued.

In the Nokia case, Apple counter-sued and eventually the two settled, cross-licensing portfolios of patents.

In the Apple-HTC suits, predominantly Apple prevailed with HTC paying more damages.

In the Motorola case, some of the claims were denied and some upheld, for which Apple paid damages.

In fact, Motorola has a long history of patent trolling (Motorola and Texas Instruments were notorious in the IC industry for their troll suits in the 90's and early 00's), and now Google, which obviously acquired Motorola Mobility for the patents, cried foul about the Apple-Samsung verdict and then turned-around in the same week filing the present Motorola-Apple suit.

Also note that as soon as Apple sued Samsung in the US, Samsung sued Apple in Korea (April 2011).

To the other commenters here on Arstechnica: It doesn't matter what you think of the Cato Institute. They have presented the fact that the ITC's role in the matter is illegal under our WTO treaty obligations. They have presented the fact that companies have used the ITC as a vector for anti-competitive practices, to shut down competition, to extract ill-gotten gains by way of direct force of the United States government. This is wrong, and what do we do? We fight about which side Cato is on.

I think some of the people here would cut off their nose to spite their face. These guys at Cato, the people you hate so much, they are on our side in this instance, and here we are fighting over it. If it was the EFF we'd all agree on it whole heatedly and commence endless circle jerking.

This is what has become of us... We have our enemies: even if they are for something we're for, we have to be against it now because they are our enemies. And we have our friends: even if they do something we don't like, we have to ignore it because they are our supposedly on our side or "for the little guy". And good Lord, don't even ask to cooperate across the isle.

When presented with a problem, it all goes to hell because we're too busy with our politics. And we wonder why Congress and the House can't get anything done! We blame them for bringing us where we are. Not only did we vote for these people, we're exactly like they are! This nation is screwed.

I don't care what any of you say, the minute a standard desktop computer can get banned from the county in which it was designed... for alleged (not proven mind you!) patent infringement... we've lost it. We've lost the ability to carry on as a normal civilization. We should give up technology and go back to the caves... because we can't carry on like this. We have serious problems with obvious plain as day solutions, but here we are fighting over the political teams like it some kind of ball game.

So I say, screw it. Let it all go to hell. We don't deserve any of this stuff. Let the nation collapse. We will only appreciate what we have by losing it.

@howitzer86, you are joking right? The problem is not with reporting on the issue, but with reporting cato's ridiculously biased spin on it as some kind of factual information. The ITC isn't the problem, contrary to the author's blatant attempt to paint them as a shadowy conspiracy, the problem is a broken patent system. But, that suits his masters just fine.

Anything coming out of an organisation dedicated to "managing your perception" to make you take choices against your best interest, absolutely has to be taken with a grain (bag) of salt. Ars allowing it run without any commentary speaks volumes about its editorial policy.

Frankly, if they are trying to hobble the ITC, it must be doing something right...

Why is Ars associating itself with this propaganda outlet? Is there a follow up article from the North Korean press agency on effectiveness of Stalinism in boosting economic growth?

edited to vent more spleen, plenty more spleen left and bile, lots more bile...

My thoughts exactly. ArsTechnica actually to me represents some of the best investigative reporting on computer and technology related subjects. I'm eagerly anticipating their review of Windows 8 as they nearly always write such types of articles - major reviews - in a well written, objective and thorough way. The other shorter articles are also very good for the most part, but when any article falls short, the community here is smart enough to be able to pick it apart and give constructive feedback as to what they felt was missing or biased.

They have a good science section as well which blows away the science sections of many newspapers in my opinion. It is why I've subscribed in the past to them. I let my subscription lapse because it seems they are focusing away from science articles and more focus on the latest news in the tech industry, which is a shame.

Now this. With CATO being a clearly very biased and I'd even say source of deliberate misinformation I'm going to be far more hesitant to subscribe. I have really been considering doing so being a subscriber in the past, as I want to support some of the better news organizations out there and I recently subscribed/donated to propublica, consumerreports and donated to NPR but this article alone has me hesitating on doing such for ars, as that is where I was likely heading next with my money. Columbia Journalism Review will likely get my money first as I sit back and hopefully see some more articles which convince me to give money to ars.

Ars editors, writers and hirer ups: More real journalism (and hopefully with an added focus on science) and less of CATO and other biased sources. For the writers: If you want to be a real journalist, don't associate yourself with the likes of CATO or other think tanks which aren't non-partisan. I will and many others will automatically consider you shill who wants to promote an agenda rather than adhere to journalistic standards - a view which is warranted by the facts of such organizations.

This article really got to me. I'm glad it caught my eye and that I read it. I was surprised to see a CATO institute research article on here but I kept an open mind and read it. I'm glad there are others on here who can see an article written by a clearly biased organization when you see it.

After commenting above, I sent some feedback via the contact link at the bottom of Ars to the editorial staff to answer exactly how such an article was allowed to be published here. I doubt that the Ars editiorial staff were ignorant about the bias and agenda of the CATO institute, and since it really seems like it can't be out of ignorance that this happened, then it must be that they were fine with running a piece that really is essentially an agenda piece, however it is disguised as reputable source of information based up by a research study done by an organization. However that organization has a history and a clear purpose of having an agenda.

I asked that their response be published should they choose to reply to me, so more than one person can see it as the comments section clearly shows this site's strongest points is still going strong. Its the Ars community, the users who frequent this site - and a large number of long time users based on the accounts registered dates - who can critically think about the information presented to them and the sources in which they come from, unlike the editorial staff here at Ars apparently.

To those who are complaining about CATO, what's wrong with the article posted? Does it have any factual errors? Do you have a problem with their arguments? Do you disagree with their conclusions? Instead of whining about a "biased source," how about you actually confront their arguments? Anything else is simply meaningless ad hominem argumentation, no better than the label of "propaganda" that you loosely apply to this article. Every single source you ever find, anywhere, has biases. That's completely inescapable. That doesn't mean, however, that everything anyone ever says should be ignored because of those biases. Mature, civil discourse requires the recognition and debate of ideas, regardless of the biases of those who submit them. Dismissing someone's factual arguments because of their politics is infantile, and is at the heart of the gridlock currently paralyzing our government. If you have better complaints than ad hominem ones, feel free to voice them. Ad hominem attacks, however, are not at all productive.

Just to question something - why is it called the "International" Trade Commission? What country has the hubris to create an organisation to protect its own companies and then calls it "International"? At least fix the name, and call it the "US Protection of Local Companies Commission".

I think you're reading it wrong. It's not the "International" Trade Commission - as in, a Trade Commission that would be expected to have jurisdiction over multiple nations. It's the (United States) "International Trade" Commission - as in, a commission to deal with United States trade that is across borders. As opposed to domestic trade.

The full name is actually "United States International Trade Commission", but no one ever says all that, any more than they call the "Fed" the "United States Federal Reserve System".

Timothy B. Lee / Timothy covers tech policy for Ars, with a particular focus on patent and copyright law, privacy, free speech, and open government. His writing has appeared in Slate, Reason, Wired, and the New York Times.